Social consequences of house price boom

[Upwind]

comment at the guardian.co.uk [click]

One of my pet subjects but I have not seen this in the mainstream media before:

"If food or energy prices were rising at 8% per year, let alone at 20% there would be outrage. There would certainly be alarm that such price rises were not sustainable and that increasing numbers of people were unable to afford a basic commodity.
Academics at the university of Aberdeen are currently running a project on this, and other, changes in society and believe that "when the implications of these developments are taken together, they hold the potential to produce profound and, as yet, largely unanticipated social consequences for this age cohort, as well as for UK society as a whole".
Astronomical prices mean that couples who cannot afford to buy, or move to larger properties, or lose half a joint income, are having children later in life when their fertility rates are lower. You do not have to own a home before you have children but many people desire at least some stability before they do so. "

Abolish Right to Buy and end inherited tenancies.

expat - by inherited tenancies, do you mean social housing? If I lived with my Dad for example and he died would you want me to lose my home and need to be rehoused?{ Find that theory odd if this is what you mean)

Anyway, now off to work..

interesting posts - Xenia we're a 'victim' landlord as you mention below. Tenants not paid rent (Feb) then late this month (2 weeks)...We're having to pay the solicitors fees to gain possession of our house so that we can evict the tenant....We have given them two months notice six months into the agreement because of exactly this reason which I know will cause them a huge inconvenience but tough..our signed agreement gives us all the option to utlisie this at any time and non payment of rent is probably the best reason to take this action.

Non payment was made, btw, with no notice...and happened to co incide with tenants wedding in February

Got to chip in with Germany again. UK landlords would no doubt be up in arms at the extent of tenants' rights over here. But it's the culture that tenants' homes need protecting - and a very good thing it is too. I really think it has to do with the fact that renting is so utterly normal over here, but in the UK often has some kind of stigma attached because of the obsession with property.

bero, we had that in England too but it stopped people wanting to rent out may be because we had both security of tenure and rents fixed are terribly terribly low rates for ever with no rights to increase. If we just had the security of tenure with no restriction on rent rises or a limited one then that might work but it's marginal unless house prices are rising if it's worth letting out property anyway - most rents hardly yield more than 5 or 6% and if you add in costs of acquisition, lawyers repairs etc you can be better off sticking your money on deposit in the buidling society. When prices are rising hugely only then is it worthwhile. So people leave the market as private landlords when that happens.

BGS, yes, it's expensive and a hassle to evict people and leaves the landlord unable to pay their own mortgage sometimes. We never had anyone not pay but that was probably just luck.

On wage inflation - teachers £7,500 1983 to £30k 2007 and same with lawyers, surely the wage rises in that period when there were also higher interest rates and more inflation and house price inflation just reflected those rises. So if we have a period of low interest rates, low inflation house prices won't rise so much nor wages. Over 50 years of owning property most people tend to benefit even if they have a good few lean difficult years either at the start or during periods of negative equity and house prices dropping.

If you need a home then it's best just to jump in and buy whatever you can afford even if the £220k terraced house I was happy with in my 20s doesn't feel good enough for some people.

xenia: buying a car is not a good reason to evict someone, no. If you need that kind of flexibility from your investments then you should invest in the stock market, not in people's homes. A good reason would be having to move back in (i.e. if landlord needs money that badly they'll have to sell their own home first. a good test of how much they need the money I think), or bad behaviour on the part of the tennant.

Expat: They have ended ingherited tenancies in England in the private rented sector. can you still inherit council houses? agree right to buy is a load of old dogmatic balls.

Anyway I've been thinking about this. what they should do is this:

All second and subsequent properties to be taxed at a rate of around 2% of the value of the property per year. Exemptions to this tax apply if house is let out on a new 5 year contract, which gives the tennant 5 years of security but lets them move out with 2 months notice at any time. rent can only go up by inflation during the 5 years. 6 month and 1 year contracts can still be used but the tax will apply. Exemptions can also apply for holiday let homes in areas that need the tourism.

This would help non home owners a lot. It would probably also ease the house price crisis but obviously wouldn't solve it.

I think though if there were the 2% tax plus perhaps a time of low or no house price inflation (the next 5 years) and capital gains tax as there is already on profits on sale, people would just move out of buy to let. That would reduce prices in the short term. It's already now the weakest sector of the property market. The old Rent Act tenancies could be inherited, yes some people still live in them and people buy up properties with the 70 year old paying £20 a week for the Nottinghill flat hoping he'll die soon but he lives 20 more years etc. It wasn't that great a system and led to few properties being available to let.

just to put a dampner on things ( unless you live in scotland) regardless of what you earn or how much your house is worth when you retire ,the cost of living in a residential /nursing home is going to cost you around £35,000 a year and thats going on present rates , so be very sure to spend any cash youve ferreted away for a rainy day as soon as you retire ,dont leave any to the kids ,unless you are psychic and manage to do it 10 years before you die !

Inherited tenancy is essential. In Somerset you have to be with the tenancy holder as resident in the house for a decade to get the inheritance, you shouldn't be able to just kick someone out after a decade! And its unlikely anyone would be in residence that long nless they needed to be- it mainly (from my experience) children who have given up their lives to care for parents, children who are to some extent cared for by their aprents (ar aunty or whatever) and 'new' partners. The only other examples I know of, are where a divorce etc has occurred and the child has moved back t arents house often with kids- if they're there after a decade then the chances are they'd be on the social housing list anyway.

I disagree that people's expectations are too high these days, Xenia. I bet most young professionals would be thrilled with any 3 bed house they could afford. In fact even families with reasonably good jobs are buying flats in Outer London instead because that is all they can afford.

I know among our neighbours are doctors, accountants, oil engineers - all bringing up families in flats because that is all they can afford. And this is one of the cheapest areas of London.

Cloud, the ol' 'It's all because young people expect too much/everything handed to htem on a plate/everything right now' load of bunk is your typical smug I'm-Allright-jack nonsense trotted out by people who've made huge amounts already on their properties and don't live in the real world of today.

The 'average' price of a one bed home here is now dangerously close to TEN TIMES the average wage.

Ten times.

You can 'take over' (inherit seems the wrong word some how!)the tenancy of a council or h/a house in England if a partner/relative dies but it is usually the choice of the council/ha, don't think it is a legal requirment.

If you were in say, a 4 bed house and would now be alone you would more likely be offered a smaller property to move into instead. When my dad was in his 20's both his parents had died and he was offered a smaller flat by the council.

However saying that, my aunt is living alone in a 4 bed house kitted out for a disabled person (her husband was disabled). The council have offered her money to move into a smaller place, and she won't.

It is important when living with someone in social housing to have a joint tenancy that way you can stay put if something happens.

Ah, you're right expat. I shouldn't let it wind me up, because it is like a scratched record from (some) people who already own their houses.

The subtext is "I have a nice house, but that is only because I am more deserving/hard working/astute than you young people who have an entitlement problem."

No amount of statistics will ever convince them. "Housing has always been expensive" is their mantra.

I have achieved contentment with living in such a small amount of space, but I don't expect to be lectured by smug people who are in a better position.

Who would want to pay 10x their wage for a small house/flat anyway? I think even if I was in the position to buy - I would be thinking twice. I would save instead.

Very, very excellently put, Cloud, and 100% spot on.

Mum's lease states that anyone who is named as living with her for at least ten years gets the lease on her (or dad's) death.

It can vary I guess.

I suppose what I'm saying is in 1983 we bought in outer London because we couldn't afford anywhere inner and nicer and people have the same choice today to buy those outer London 3 bed terraces for £220k on two wages just as we did in 1983. I don't think it's harder now and interest rates are much lower. Yes you have a commut but I had it in 1983 and it didn't kill me.

'people have the same choice today to buy those outer London 3 bed terraces for £220k on two wages just as we did in 1983.'

I suppose perhaps they have if they qualify for a £220K mortgage.

LOL!

'It was good enough for me to walk uphill 5 miles in snow, so of course, you, too!' 'I had my leg amputated without anaesthetic and it didn't kill me, so I don't see why it's any different for you.'

Change the record!

So teacher on £30k and wife on £30 - not that unusual for London salaries although I accept that's above the average UK wage of £20k. The average London wage is higher than £20k. They borrow 3.5 times their joint salary. It's still possible. It has never been possible or easy even in 1983 if you earn less than the average wage.

Not true to say that everything was proportionately just as expensive.

DH and I bought a lovely one-bed flat in Stoke Newington for a song in 1990 - neither of us had even qualified but it really wasn't a financial hardship at all to afford the mortgage.

I don't know many trainees who are buying properties these days .

Are you aware that there is an entire geographical area outside of London, collectively known as the United Kingdom, outside London?

Just checking.

Please excuse the repetition there.

Alright Xenia, you've had your say. There's no need to labour the point.

Let's do a bit of deduction here. If I want a serious opinion about how expensive or affordable it is to buy a house these days, who should I ask?

A very rich person living in London who bought more than 20 years ago, has a million-pound plus mortgage? Or a person who actually earns the sort of money you are talking about?

Mmmmm - this may take me a while....

All I was saying is that these little outer london terraced houses which are actually rather nice can be bought today for £220k, that's all. Now thats not much use if you're buying on your own and are a nurse but it's affordable for most middle class couples in London.

Actually if you look at the detailed stats, outer london has gone up less than almost anywhere else in the country. So maybe prices were previously just as unaffordable as they are now.

It still doesn't solve the problem of low earners in London who can't get a council house any more. And it doesn't solve the problem of lower earners in areas where prices have gone up disproportionately.